Should check cashing outlets or payday loans be outlawed entirely or regulated by the government? Did you know that the APR on this type of loan averages from 300% to 400% and can even be as high as 740%?

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• actually I think most people are misinformed, they think they get $100 for a fee of $25 but the reality is that if they do not pay it back that interest rate kicks in and can kill your finances. I got a payday loan for $150 once to save my credit, and fortunately paid it back a week later. However, I noticed the percentage rate was like 498% and it was in tiny, tiny print

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  by Morg the Army wife on May 17th, 2007

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• what is APY? some states have already made check cashing places illegal. I wonder why they aren't everywhere, when there's laws regulating how high the APR on a credit card can go.

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  by Morg the Army wife on September 21st, 2007

• APR = annual percentage rate
  APY = annual percentage yield
  PR = periodic rate
  
  APR over a year = APY.
  
  This isn't just as simple as PR * 12 because of compound interest.
  
  For the sake of simplicity, let's say you have a savings account with 12% APR. You put $100 in and don't add a cent of your own money in after that.
  
  The 1% is calculated as 12%/12 months
  
  end of month 1: $100 * 1% = $101
  month 2: $101 * 1% = $102.01
  month 3: $102.01 * 1% = $103.03 (actually $103.0301)
  month 4: $104.06
  month 5: $105.10
  month 6: $106.15
  month 7: $107.21
  month 8: $108.29
  month 9: $109.37
  month 10: $110.46
  month 11: $111.57
  month 12: $112.68
  
  If it were simple 12% APR, you'd have $112.00
  The APY ends up being 12.68%
  
  The quick way to find out how much you'd have at the end of the year would be 100*(1+.12/12)^12
  
  Most loans show APR because it's the lower number, where as investment places show APY because it's larger.

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  by SarahK on September 21st, 2007

• my gosh lol! annual percentage yield would have been enough, I didn't even remember that term, for some reason I thought maybe you thought the APR was monthly and APY was yearly (some people don't what APR stands for, no offense for assuming) the APR of some places like that is actually up in the 500 to 800% around here. Can you imagine!?!

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  by Morg the Army wife on September 21st, 2007

• Heh. Well, in case other people see this, they can learn something, right? :)
  
  The fee ends up adding up like CRAZY, especially when people keep coming back. It's a horrible cycle to get stuck in. (And, to think, I used to think that the cash-advance APR/fee was crazy!)

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  by SarahK on September 21st, 2007

• yes, it was an excellent explanation, you should include it in your answer :o) then maybe you can steer people away from check cashing places and to teach them to look closer at their credit card offers.

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  by Morg the Army wife on September 21st, 2007

• I read a newspaper article once, or maybe I heard it on NPR...they were doing a story and there were some people who went from place to place and they talked to one guy who had like 13 checks out at once...

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  by Morg the Army wife on September 21st, 2007

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